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Excess scholarships as earned income

pfdcpa
Level 1

My client has excess scholarships above qualified expenses. when I try to enter that in the miscellaneous income screen I get an critical diagnostic asking for parents information.  From my understanding it adds to earned income and should be reported on the line for the W-2

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TaxGuyBill
Level 14

I agree with Susan.

For some weird reason the IRS says that for purposes of the Standard Deduction that taxable scholarships can be considered as Earned Income.  But for the Kiddie Tax (and pretty much everything else), it is Unearned Income.

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5 Replies 5
sjrcpa
Level 15

Yes it gets reported on the wages line, but it counts as unearned income for kiddie tax.


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pfdcpa
Level 1

Thank you for your help

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sjrcpa
Level 15

You're welcome.


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TaxGuyBill
Level 14

I agree with Susan.

For some weird reason the IRS says that for purposes of the Standard Deduction that taxable scholarships can be considered as Earned Income.  But for the Kiddie Tax (and pretty much everything else), it is Unearned Income.

View solution in original post

pfdcpa
Level 1

Thank you for your help.  That seems to fix my problem

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